Anyone buying gilts right now?

Linton

Aminatidi said:

I never have fully got the "sweet spot" along the yield curve so whilst I appreciate I'm asking a very broad question, if you currently had a significant sum in 100% equities but weren't convinced by multi-asset fund or a bond tracker or MMF or cash but wanted to try to dial down volatility a little where about on the maturity dates would you be looking right now please?

It all depends on your time frame.  If the money will be needed in the next 5 years 100% equities would be foolish. You should be holding sufficient in cash or near to cash to meet your needs.

If it's more than say 10 years , why do you want to "dial-down on volatility" now?

If you know what you are trying to achieve, and when, choosing the appropriate class of investments should be straightfoward.   

matasymbol

Hi All,

Appreciate if you can provide any thoughts on my circumstances.  I'm in my fourties and thinking of retiring in the next few years and have approximately the following 

1. £900,000 - Various index fund equities although mostly US
2. £1,400,000 - UK bank interest savings spread across many account to ensure the 85,000 protection limit isn't breached
3. £500,000 - UK Gilts Mostly T26 maturing Jan 2026 with a large capital gain ~ 4%. from now and low coupon
4. £200,000 - Investment ISA global index fund

Only in the last few months I've purchased gilts as I know as a 40% tax payer even with 4% CGT the net interest to compare for a bank would be 6.6% which currently compares against ~4.5-4.7% so much more favourable. 

I know everyone indicates to have a diversified portfolio however I'm thinking I should purchase a lot more gilts at least until I'm only a 20% low rate tax payer eg perhaps another 600,000 of gilts at least.  There is a risk of course that the UK defaults on paying them bank perhaps marginally more than the FCFS protection ever fails however it seems very neglible. I don't feel comfortable with more equities at this stage and the balance feels right I just think I should assign more to gilts than bank savings

If others are in a similar situation I'd appreciate your thoughts

InvesterJones

matasymbol said:

I know everyone indicates to have a diversified portfolio however I'm thinking I should purchase a lot more gilts at least until I'm only a 20% low rate tax payer eg perhaps another 600,000 of gilts at least.  There is a risk of course that the UK defaults on paying them bank perhaps marginally more than the FCFS protection ever fails however it seems very neglible. I don't feel comfortable with more equities at this stage and the balance feels right I just think I should assign more to gilts than bank savings

IMHO It's a question of when you will need the money. Savings are quick. A maturing gilt ladder is dependant on when they mature obviously - if you sell before maturity then risk profile changes a lot compared to cash.

matasymbol

thanks @InvesterJones yes consider I will never need to access this morning at all to Jan 2026. I will retain plenty in savings for the coming year. I know the maturity value of £100 is guaranteed so I don't really care if the value increases / decreases along the way. So in that case isn't it better to acquire more gilts

matasymbol

matasymbol said:

this morning at all to Jan 2026

this "money" at all

masonic

I made a couple of purchases this morning averaging 14 years to maturity. That seemed to be the sweet spot for me. All flat, but I am using the "up to 10 years" fund for exposure to index linked gilts (I already hold a chunk of this and all my future contributions will be going into it for at least the next year or so).

jimjames

In your forties having £1.4m in bank savings seems somewhat high if you need that money to last 40 odd years. Are you planning to add to the investments at all?

DRS1

jimjames said:

In your forties having £1.4m in bank savings seems somewhat high if you need that money to last 40 odd years. Are you planning to add to the investments at all?

I think what he is proposing to do is move some of the cash savings into gilts on the basis that he will get similar returns but as a higher rate tax payer will pay less tax on those returns from gilts than he would on the interest from cash savings.  I suspect he also regards it as a bad time to invest in equities.  But I do not think he is proposing to switch out of his investments.

DRS1

Oh and with gilts he does not need to worry about the £85K limit.
Frankly how he managed to spread £1.4mill around so as not to go over the £85k with any one institution beats me.

matasymbol

DRS1 said:

Oh and with gilts he does not need to worry about the £85K limit.
Frankly how he managed to spread £1.4mill around so as not to go over the £85k with any one institution beats me.

Yes we just to worry about the government defaulting as the only risk with gilts.

You can manage bank accounts easily whilst keeping to the 85K limit using payment platforms such as raisin and flagstone which allow accounts to be created in minutes from a single holding account